STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DIVISION OF FLORIDA LAND SALES ) AND CONDOMINIUMS, )
)
Petitioner, )
)
vs. ) CASE NO. 79-560
)
THE OAKS OF BROWARD, INC., )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 5 June, 1979 at Miami, Florida.
APPEARANCES
For Petitioner: Mary Jo M. Gallay, Esquire
Staff Attorney
Department of Business Regulation Johns Building
725 South Bronough Street Tallahassee, Florida 32301
For Respondent: Vincent E. Damian, Jr., Esquire
1003 DuPont Building
Miami, Florida 33131
By Notice to Show Cause dated 9 February 1979 the Division of Land Sales and Condominiums, Petitioner, seeks a cease and desist order against The Oaks of Broward, Inc., Respondent. As grounds therefor it is alleged that Respondent has failed to file documents required and to pay a $10 filing fee for each condominium unit it offered for sale; and that Respondent has violated the provisions of Chapter 718, Florida Statutes, in waiving the recreation lease payments for the 75 condominium owners to whom it sold condominiums. At the hearing the parties stipulated to the facts and 4 exhibits were admitted into evidence.
FINDINGS OF FACT
The Declaration of Condominium for Oaks of Broward was filed by Margen, a Florida Partnership, in May, 1974 in the Public Records of Broward County and with the Petitioner. All documents required to be filed by Margen with Petitioner were filed and the fees paid.
Simultaneously a recreational lease was filed of property adjacent to the condominium in which Barnett Bank of Hollywood was named as Trustee and Lessor, and The Oaks Condominium Association, Inc. of Broward as Lessee.
Between May 1974 and early 1976 Margen sold to individuals 39 condominium units at Oaks of Broward. In early 1976, Housing Investment Corporation, mortgagee, began foreclosure proceedings which resulted in title to all of the Oaks condominium property, except for the 39 units previously sold, being taken by The Oaks of Broward, Inc., Respondent.
Thereby Respondent became successor in title to the previously unsold
75 units in the building and to the position of the Lessor on the long-term recreational lease.
On or about August 1977, Respondent offered for sale the 75 condominium units pursuant to prospectus admitted into evidence as Exhibit 2. In addition thereto and as part of the sales effort Respondent executed and recorded the Declaration Waiving Rents, a copy of which was admitted into evidence as Exhibit
Neither of these documents was filed with Petitioner.
The 75 units owned by Respondent were sold with the recreational lease rents waived.
Pursuant to the terms of the recreational lease the original 39 buyers pay $20 per month, either to the Association or directly to the Lessor. This lease is a net/net lease, which means the Lessor performs no services except to provide the premises themselves. The Condominium Association is responsible for and pays all maintenance, taxes, upkeep and expenses for the operation of the Recreation Area. All condominium units, the original 39 as well as the remaining 75, pay to the Association, as part of the common expenses, their pro rate share of those operating expenses. It is this disparate treatment of the two groups of unit owners with respect to the recreational lease rent payment of
$20 per month that is one subject of Petitioner's request for a cease and desist order.
The second subject of the Petition for a cease and desist order is Petitioner's contention that Respondent is a Developer and is required to file documents and pay a $10 filing fee for each of the 75 condominiums sold, regardless of whether fees for these 75 units were paid by Respondent's predecessor in title.
CONCLUSIONS OF LAW
I.
Respondent contends that the resolution of the issues here involved requires the interpretation of the Declaration of Condominium and contracts between the Respondent and the condominium owners, and that this is a judicial function which is beyond the jurisdiction of the agency or of an administrative law Hearing Officer. As authority for this position, Respondent cites Peck Plaza Condominium v. Division of Florida Land Sales and Condominiums, et al., Fla. 1st DCA Case No. GG-440 filed April 11, 1979.
Peck Plaza involved a dispute between the developer and the condominium association as to who should pay for the electricity for the operation of a private elevator serving only the developer. The court hold the agency was without jurisdiction to resolve the dispute, as this involved the interpretation of ambiguous contract provisions and this was solely a judicial function. In so holding the court stated:
We find no provision in the condominium law that would grant to the Respondent Division the authority to interpret and
then enforce its interpretation of a condo- minium contract that is admittedly ambiguous. Jurisdiction to interpret such contracts is, under our system, vested solely in the judiciary.
Here Petitioner is seeking to enforce the provisions of the Condominium Act pursuant to the authority granted in Section 718.501 which provides in pertinent part:
(1)(b) Notwithstanding any remedies available
to unit owners and associations, if the division has reasonable cause to believe that a violation of any provision of this chapter has occurred, the division may institute enforcement proceed- ings in its own name against any developer or association, or their assignees or agents, to secure compliance with the chapter as follows:
The division may issue cease and desist orders pursuant to s. 478.171.
The division may bring an action in Circuit Court for declaratory relief, injunction relief
or restitution on behalf of a class of unit owners or lessees.
Section 478.171, Florida Statutes, provides in pertinent part:
If the division determines after notice and hearing that a person has:
(a) Violated any provision of this chapter;
(e) Violated any lawful order or rule of the division;
it may issue an order requiring the person to cease and desist from the unlawful practice and take such affirmative action as in the judgment of the division will carry out the purposes of this chapter.
Here Petitioner notified Respondent that it considered Respondent's actions with respect to the recreation lease payments and with its failure to file and pay the filing fees to be in violation of the Condominium Act and advised Respondent of its right to a hearing to contest those allegations. This hearing, which was requested by Respondents, ensued.
The Petitioner, and in this proceeding the Hearing Officer, will ultimately have to make a determination whether or not the acts of Respondent violate the provisions of the statute the Petitioner is called upon to enforce. This may well require the Hearing Officer to interpret provisions of the Declaration of Condominium as well as the provisions of the Condominium Act, to make the determination the legislature delegated to the Petitioner when it enacted these statutes and entrusted to Petitioner the duty to enforce those provisions. Since the legislature specifically directed the division to enforce compliance with Chapter 718 and enunciated the procedure to follow in doing so, this clearly appears to be one of those quasi-judicial determinations passed by
the legislature to an an administrative agency. To hold otherwise would be tantamount to holding that the legislature, in enacting Chapter 718, Florida Statutes, intended a useless act or that the statute is unconstitutional. The lack of jurisdiction in this forum to rule on the constitutionality of the statute is well-recognized, as is the canon of statutory construction that the legislature did not intend an absurd result. 30 Fla JUR s. 76 STATUTES and cases there cited.
Accordingly, I find the Division of Administrative Hearings has jurisdiction over the parties and subject matter of these proceedings.
II.
Petitioner contends that Respondent is a developer and as such is required to file documents and to pay a filing fee for all condominiums sold. Section 718.103(13) provides:
"Developer" means a person who creates a condominium or offers condominium parcels for sale or lease in the ordinary course of business, but does not include an owner or lessee of a unit who has acquired his unit for his own occupancy.
Section 710.502 provides in pertinent part:
A developer of a residential condominium shall file with the division one copy of each of the documents and items required to be furnished to a buyer or lessee by ss. 718.503
and 718.504, if applicable. Until the developer has so filed, a contract for sale or lease of a unit for more than five years shall be voidable by the purchaser or lessee prior to the closing of his purchase or lease of a unit.
Upon filing as required by subsection (1), the developer shall pay to the division a filing fee of $10 for each residential unit to be sold by the developer which is described in the documents filed. If the condominium is to be built or sold in phases, the fee shall be paid prior to offering for sale units in any subse- quent phase.
Those documents required by Sections 718.503 and 718.504 to be filed include sample contracts for the sale of the condominiums to be used by the developer, declaration of condominiums, documents creating the association, bylaws, ground lease, management contract, estimated operating budget, lease of recreation facilities, copy of the floor plan of the unit, copy of all covenants and restrictions, sales brochures, and a prospectus or offering circular containing specified information.
Rules to implement these statutory provisions are contained in Chapter 7D-17, Florida Administrative Code, which Provides in pertinent part:
.01(1) A developer of a residential condominium shall file with the Division all documents required
by the statute and these rules. Such filing shall occur at the time the condominium is created pursuant to 718.104, F .S. or prior to any offering of a condominium unit to the public, whichever occurs first.
Rule 7D-16.01 provides in pertinent part:
Every developer required to file with the Division shall pay a filing fee of $10.00 for each residential unit to be sold by the developer as described in the condominium documents. The fee shall be paid at the time of filing for said units whether constructed
or unconstructed.
If the condominium is offered as a phase condominium, the fee shall be paid for all units in the phase prior to offering for sale units in each phase.
Since the developer, Margen, paid the filing fees prior to going into bankruptcy, it would seem that additional fees would not be required from his successor in title, unless additional documents must be filed. The definition of developer above quoted clearly includes Respondent, and, from the exhibits admitted into evidence, it is apparent that Respondent prepared documents which the statute requires be filed. Furthermore it is noted that Exhibit 2, The Prospectus for The Oaks, which also contains the Articles of Condominium and By- Laws of the Association bears a date of August 15, 1977, long after the first 39 units were sold by Margen. This prospectus, as well as Exhibit 3, the Declaration of Waiving Rents, are required to be filed with the division.
A study of Chapter 718, Florida Statutes, leads to the conclusion that the filing fee is intended to defray some of the cost to the division resulting from reviewing the various documents that must be filed. If this is the purpose of the filing fee, and the name itself so indicates, the division should be reimbursed for part of the cost to it resulting from documents filed by developers. Each time a subsequent "developer" acquires more than 20 units for the purpose of reselling in the normal course of business, various documents must be filed with the division and the developer is required to pay a filing fee of $10 for each unit it is offering for sale.
III.
The issue respecting Respondent waiving the recreational lease rental, payment of $20 per month for the 75 units sold by Repondent while not waiving this payment for the original 39 purchasers involves both an interpretation of the Condominium Act and the validity of various contracts. Petitioner contends that the Condominium Act requires all such fees to be waived if any are waived. As authority for this position, Petitioner refers to Section 718.116(8), Florida Statutes, which provides,:
No unit owner may be excused from the payment of his share of the common expenses of a condominium unless all unit owners are
likewise proportionately excused from payment, except as provided in subsection (6) and the
following cases [not applicable to the facts herein]
Respondent takes the position that the $20 per month paid to the Lessor is not a common expense and that the Lessor has the right to waive such payment.
References to this $20 per month payment in the Declaration of Condominium are inconsistent regarding the nature of the payment. In Section 9 under "Common Expenses" it is provided:
Common Expenses. The common expenses of the Condominium, not including the obligation of each unit owner for rents under the 99-Year Lease Agreement, shall be shared by the unit owners as specified and set forth in Exhibit D.
The obligation of each unit owner for
rent under the 99-Year Lease Agreement is as set forth in that Agreement attached hereto as Exhibit B and is collectible by the Association as common expenses.
Section 19 of the Declaration of Condominiums is headed "99-Year Recreational Lease" and Provides in pertinent part:
The Association, Lessee, has entered into
a 99-Year Lease Agreement . . . with BARNETT BANK OF HOLLYWOOD, TRUSTEE as Lessor.
Pursuant to Florida Statute 711.121, and pursuant to the 99-Year Lease, all monies due and to become due under the provisions of said Lease, are, and shall continue to be for the full term of said Lease, declared to be common expenses of the Condominium
Each unit owner agrees to be bound by the terms and conditions of said 99-Year Lease and agrees to make payments to the Association of his share of the monies due . . .
Each unit owner in the Condominium shall make payments to the Condominium Association or to the Lessor of his assessed pro rata share of the rental due under and pursuant to said 99-Year Lease as part of the common expenses chargeable
to his condominium parcel. It shall be mandatory for each unit owner to make his pro rata payments, as assessed by the condominium association as
part of the common expenses, regardless of whether or not said unit owner uses the recreational facilities.
Whenever any of the provisions of the 99-Year Recreational Lease be in conflict with the provisions of this Declaration, then the provisions of the 99-Year Recreational Lease shall be controlling.
The 99-Year Recreational Lease provides for a rental payment of $20 per month per condominium unit to be paid by Lessee to Lessor; it provides for
unit owners to pledge an interest in their unit to Lessee as guarantee of their pro rata share of the common expenses "of which the monthly rental under the 99- Year Lease Agreement is a part thereof"; it makes Lessee agent of each unit owner to perform acts required of owners under lease; and it provides for the use and enjoyment of the recreational facilities by the unit owners upon their compliance with the conditions of the lease.
The Lease Agreement further recites:
In order to provide each unit owner a reasonable end convenient method to avoid the results he may suffer due to the default by the Lessee Association in the payment of its rental obligation hereunder, the Lessor and Lessee mutually agree that at the option of either a unit owner or the Lessor any member of the Lessee Association
may or must pay his monthly obligation . . . directly to the Lessor each month . . .
Respondent refers to various Provisions of the By-Laws of the Association, the provisions of the Declaration of Condominium and to those provisions of the Recreational Lease which provide that the unit owner may pay directly to the Lessor, to support its position that these lease payments are not part of the common expenses. However, it is noted that the Declaration of Condominiums and the Lease Agreement both provide that the latter is the superior document and shall take precedence in the event of conflict. Those provisions of the Lease Agreement above noted clearly and unequivocally designate the $20 per month payment as a common expense and nowhere is this designation negated. In support of Respondent's position, the most that can be said of other references to the $20 lease payment is that it is not always specifically designated as a common expense.
Respondent recognizes that these payments are designated in many places of the Declaration and Lease as common expenses and contends that, even if they are common expenses, because the Lease provides that the owner may pay this rent directly to the Lessor, a contractual agreement is created between the unit owner and the Lessor and the Lessor may waive this contractual requirement of the unit owner to pay. But for the provisions of Section 718.116(8), Florida Statutes, above quoted this observation would be correct. That provision bars one unit owner from being excused from the payment of a common expense unless all other unit owners are likewise excused. Respondent's argument that the Lessor could give back these payments to such unit owners as he so desired is incorrect as that would allow the Lessor to do indirectly what the statute says he may not do directly.
Abuses associated with recreational leases in condominiums were considered by the legislature in 1977 and 1978. To assure prospective purchasers were made aware of all recreational lease provisions, Section 718.504, Florida Statutes, was amended to more specifically detail those items that must be included by the developer in the Prospectus or offering circular. As provided in Subsection (6)(f) these include:
A reference to the location in the disclosure materials of the lease or other agreement providing for the use of those facilities, and
A description of the terms of the lease, or other agreements, including the length of the term; the rent payable, directly or indirectly, by each unit owner, and the total rent payable to the lessor, stated in monthly and annual amounts for the entire term of the lease; and a description of any option to purchase the property leased under any such lease, including the time the option may be exercised, the purchase price or how it is to be determined, the manner of payment and whether the option may be exercised for a unit owner's share or only as to the entire leased property. [Emphasis added].
This statute requires that the prospectus advise prospective purchasers of any provisions in the recreational lease which would allow a unit owner to opt out of the recreational lease payments by paying a stated amount to the lessor and whether or not this could be done by a unit owner if all other unit owners did not join.
The legislature thereby contemplated a situation similar to that developed here where unit owners were allowed to get out of the lease payments. The prospectus offered to those purchasing the units owned by Respondent, as part of the purchase, relief from payments of $20 per month pursuant to the recreational lease. The Declaration Waiving Rents for those 75 purchasers accomplished that.
While it is true, these 7 unit owners will he treated differently than those, and their successors in title, who Purchased the first 39 units, the contracts entered into by the 39 purchasers were valid when entered into and remain valid. Section 718.116(8) does not invalidate these contracts.
The purpose of Section 718.116(8) is to require each occupant to pay his pro rata share of the expenses common to the condominium. This is to preclude the situation when one has to pay a greater portion of the expenses because another is excused from paying. That situation does not exist here. Whether the purchasers of the 75 units sold by Respondent pay or do not pay pursuant to the recreational lease does not affect the payments of the original
39 purchasers. In this sense the recreational lease payments are not "common expenses" but a surcharge over and above operating and maintenance expenses. Accordingly, the purpose and intent of Section 718.116(8) is not violated by the agreement waiving recreational lease payments for the 75 purchasers who purchased units from Respondent.
To hold that by waiving recreational lease payments to the 75 purchasers to whom it sold units, Section 718.116(8) invalidated previously valid contracts, would introduce the possibility of constitutional infirmities to Section 718.116(8). An interpretation of a statute that avoids constitutional conflicts is preferred over an interpretation that raises such conflicts.
Another possibility raised by a strict and literal interpretation of Section 718.116(8) is that the agreement Waiving Recreational Lease Payments is void or voidable. Since the waiving of these payments was a valuable part of the consideration paid by the 75 owners for the units purchased from Respondent, to hold that agreement violated the statute and was, therefore, invalid would
leave these purchasers with a cause of action against Respondent. If successful in their suit, the parties would be left in the net identical position in which they now find themselves.
From the foregoing it is concluded that the Agreement Waiving Recreational Lease Payments for the 75 unit owners who purchased from Respondent is in accordance with the legislative intent expressed in Section 718.504(6)(f) above quoted and does not violate Section 718.116 (8). It is therefore
RECOMMENDED that the Notice to Show Cause be dismissed. Entered this 17th day of July, 1979.
K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
(904) 488-9675
COPIES FURNISHED:
Mary Jo M. Gallay, Esquire Staff Attorney
Department of Business Regulation Johns Building
725 S. Bronough Street Tallahassee, Florida 32301
Vincent E. Damian, Jr., Esquire 1003 DuPont Building
Miami, Florida 33131
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BUSINESS REGULATION
JOHNS BUILDING
725 SOUTH BRONOUGH STREET TALLAHASSEE, FLORIDA 32301
STATE OF FLORIDA, DEPARTMENT OF BUSINESS REGULATION, DIVISION OF FLORIDA LAND SALES AND CONDOMINIUMS,
Petitioner,
vs. CASE NO. 79-560
THE OAKS OF BROWARD, INC.,
Respondent.
/
FINAL ORDER
This order is entered by the Director, Division of Florida Land Sales and Condominiums pursuant to the Section 210.59, Fla.Stat., following a Recommended Order entered in this cause by Hearing Officer, K.N. Ayers, on July 19, 1979.
Exceptions to such Recommended Order were filed by both the Petitioner and Respondent in this cause. Those filed by the Respondent are found to be without merit.
After a review of the Record in this cause, the factual findings of the Hearing Officer are adopted. The Conclusions of Law reached by the Hearing Officer are rejected in part, such rejection being predicated on the following reasons:
In the Recommended Order entered by the Hearing Officer, the ultimate determination made by him was that the payments due under the recreational lease are designated as a common expense. The Hearing Officer further noted that the provisions of Section 718.116(8), Fla.Stat., bar one unit owner from being excused from the payment of a common expense unless all other unit owners are likewise excused.
The Recommended Order, however, goes on to determine that the legislative intent of Section 718.504(6)(f)(3), Fla.Stat. is such that actions such as the developer's which initiated this cause are permissible. This conclusion constitutes an error of law. That section, and its predecessor, Section 711.69(4)(j), Fla.Stat. requires notice of the terms of a recreation lease and a description of any option to purchase the leased premises, and an advisement as to whether the option may be exercised for a unit owner's share or only as to the entire leased property. Article XXXIII of the Ninety-Nine Year Lease, which was introduced into evidence in this cause, provides for an option to purchase,
but exclusively to the Lessee, the condominium association. Hence, the Declaration excludes the possibility of individual unit owners withdrawal from obligations created under the lease by the payment of a certain amount.
Certainly, the legislature did not intend to prohibit recreational lease buy- outs by the passage of Section 718.504(6)(f)(3), Fla.Stat. Rather, it intended to require disclosure of all such options and their terms to unit purchasers.
The statute by its very terms intends to encompass both the situation in which a facility is leased by an association that in which individual unit owners are parties to a lease. It is a disclosure provision, and not a substantive one.
The Recommended Order makes reference to the possible invalidation of contracts. Such an issue is not appropriately reached in this forum, and is not germane to the issues raised for determination in the Notice to Show Cause initiating this action. No request has been made to the Hearing Officer that he declare any contacts to be invalid. The predecessor of Section 718.116(8), Fla.Stat., which was Section 711.15(8), Fla.Stat. was in effect at the time of the recordation of the Declaration Waiving Rents and the sale of all units in the condominium. Therefore, the actions of the Respondent were in violation of Chapter 718 from their beginning. No statute has been passed by the State impairing existing contracts. The statute violated preceded the contracts in existence. The Recommended Order further observes that "In this sense the recreational lease payments are not "common expenses" but a surcharge over and above operating and maintenance expenses." Having determined that the Declaration of Condominium and Nine-Nine Year Lease designate the rental payments as common expenses, their designations as a "surcharge" in any sense is improper. A "surcharge" is defined as an overcharge; an exaction, impost, or encumbrance beyond what is just or right, or beyond ones authority or power.
Black's Law Dictionary, (Rev. 4th Ed. 1968), p. 1511.
The entire tenor of Chapter 718 is to ensure that condominium unit owners are treated fairly and equally. The question is not whether the original purchasers incur or do not incur additional expenses by virtue of the Declaration Waiving Rents. The question is the validity of the action of the Respondent in waiving a common expense for some unit owners, but not for all. By waiving rental payments designated as a common expense by the condominium documents for some, but not all, condominium unit owners. Respondent has violated the provisions of Chapter 718.
Respondent, in its exceptions, complains that the filing fee of Ten ($10) Dollars required by Section 718.502, Fla.Stat., is "arbitrary unreasonable".
This assertion is found to be without merit. Such amount was found to be appropriate by the legislature, and Respondent has proffered no argument or factual information challenging its propriety.
The Conclusion of Law reached by the Hearing Officer pertaining to the requirement that Respondent file those documents required by Section 718.502, Fla.Stat. and pay the filing fees required by Section 718.502, Fla.Stat. is hereby approved and adopted.
Therefore, the following order is hereby entered:
Respondent, The Oaks of Broward, Inc., is ordered to cease and desist its continuing violation of Chapter 718, Fla.Stat., and in particular Sections 718.502(1) and (2), Fla.Stat., and to file the documents required therein immediately upon rendition of this order, and further to pay the filing fees required therein.
Respondent is further ordered to cease and desist from its continued violation of Chapter 718, Fla.Stat., and in particular Section 718.116(8), Fla.Stat., and to ensure that all unit owners in the Oaks of Broward Condominium are proportionately excused or held uniformly responsible for the rental payments designated as common expenses.
DONE AND ORDERED in Tallahassee, Leon County, Florida, this 31st day of August, 1979.
GORDON J. PFERSICH, DIRECTOR
Division of Florida Land Sales Condominiums
725 South Bronough Street Tallahassee, Florida 32301
(904) 488-7365
COPIES FURNISHED:
Mary Jo M. Gallay Staff Attorney
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Vincent E. Damian, Jr., Esq. 1003 Dupont Building
Miami, Florida 33131
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing has been furnished by U.S. Mail to Vincent E. Damian, Jr., Esquire, 1003 DuPont Building, Miami, Florida 33131 this 31st day of August, 1979.
MARY JO M GALLAY
| Issue Date | Proceedings |
|---|---|
| May 23, 1980 | Final Order filed. |
| Jul. 17, 1979 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Aug. 31, 1979 | Agency Final Order | |
| Jul. 17, 1979 | Recommended Order | Condominium may charge recreational lease for original lessee and not charge it for later lessees as the recreational lease is severable from condominium lease. |
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